We are going to look at the Pound Yen which is often referred to as the monster. It’s notorious for causing many traders financial and emotional turmoil .Price has been rallying since December last year. Soon after we went into a consolidation period in the form of a descending triangle. On seeing this as price action traders, we must be rejoicing because a good trend will come out of this. Most traders don’t like it when price ranges. Yet we all know trends follow after ranging periods in the market.
A descending triangle breaks out below 7 times out of 10.This does not mean we should automatically sell the market. Patience is needed to join in, whichever side there is a breakout. Price will guide us whether we shall reverse the previous uptrend or continue with the bulls. Therefore we sit on our hands until we get a signal, following a breakout and confirmation.
In this week’s analysis we are looking at the Australian dollar vs. the Lonnie. It is clear that since November of last year price was in a downtrend. Around February this year we had a rally within an ascending channel. Price usually consolidates in form of chart patterns. Safe to say the downtrend was our main trend and the uptrend(within the channel) is our minor trend .We had a breakout which closed below and a pullback ensued that was successful.
Once we broke out of the channel, our bias of any bullish momentum was nullified. There’s a high probability that we will continue with the bearish major trend. We now start looking for opportunities to short the market after a confirmation. Therefore let’s closely look on this pair to see whether we will continue with the falling prices.